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So, what's the economic view in Dublin?

By Seamus Coffey

Published 03/05/2016

'The Assembly elections mark the end of a three-year election cycle in Northern Ireland that covered the new council and Westminster votes, so it feels like a good time for reflection'
stormont

A common refrain in Ireland’s political discourse is that our public services are not up to scratch because we don’t spend enough money on them.

Across areas such as health, education, social protection and housing, there are strong arguments that the government should do more — but doing more is almost always equated with spending more.

Proposals are made for additional spending, with little genuine appraisal of what we already spend. The reality is that already we provide resources at the level of our European peers for the provision of these services. If we judge the services to be below what is provided elsewhere, it has more to do with how we spend the money rather than how much.

At an aggregate level, government spending in Ireland is the lowest in the EU15. On average, government spending across the EU15 is the equivalent of ten percentage points of GDP higher than it is in Ireland. This suggests that if government spending in Ireland was at a level comparable to other EU countries there would be an extra €20bn (£15.6bn) available.

There are two issues to consider before jumping to the oft-reached conclusion that our health, education and social protection systems would be better if only we spent more on them. And, of course, we cannot forget that we tried that before.

Between 2000 and 2006, government spending on health, education and social welfare increased by €20bn (£15.6bn). What assessment would be made of the service improvement brought about by that increase?

The first issue is the technical but important fact that GDP overstates our national income, due to the oversized presence of multi-nationals here.

Which brings us to the second issue: what do other countries get for this additional spending?

Remarkably, almost all of the difference can be explained by one category — old-age social protection — mainly state pensions.

In 2014, the €7bn (£5.5bn) or so we spent on old-age social protection was equivalent to 3.7% of GDP, the lowest in the EU by some distance. The next lowest spender in this category was The Netherlands, where this spending was equivalent to 6.8% of GDP.

Seamus Coffey is an economist at University College Cork, and is a member of the Irish Fiscal Advisory Council, writing in a personal capacity

Belfast Telegraph

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